P10A-9B Axel needs new
manufacturing equipment. Two companies can provide similar equipment but under
different payment plans: Plan A: MRE offers to let Axel pay $55,000 each year
for five years. The payments include interest at 12% per year. Plan B:
Westernhome will make a single payment of $425,000 at the end of five years.
This payment includes both principal and interest at 12%.
Requirements
1. Calculate the present value of
Plan A.
2. Calculate the present value of
Plan B.
3. Axel will purchase the
equipment that costs the least, as measured by present value. Which equipment
should Axel select? Why? (Challenge)
TUTORIAL PREVIEW
Plan A:
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Plan B:
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Rate -
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12%
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Rate -
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12%
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File name: P10A-9B Axel needs.xlsx File type: xlsx PRICE:$6
